Pakistan’s new Auto Policy 2026 is unlikely to bring a significant reduction in vehicle prices, although proposed tax concessions on electric, hybrid and selected small cars may provide some relief to consumers, an auto industry expert has said.
Speaking on ARY News programme Ba Khabar Savera, auto industry expert Masood Khan discussed the potential impact of the new policy on vehicle prices, taxation, local manufacturing and the future of Pakistan’s automobile industry.
According to Khan, the policy offers greater incentives to electric vehicles than to ordinary consumers, while proposed changes in taxation could result in price reductions for some vehicle categories and increases for others.
Changes in vehicle taxes and prices
Khan said the existing one per cent sales tax on electric vehicles is expected to remain unchanged under the new policy. However, the sales tax on range-extender electric vehicles is proposed to increase from one per cent to six per cent.
Meanwhile, the sales tax on plug-in hybrid and conventional hybrid vehicles is proposed to be reduced from 18 per cent to nine per cent, potentially providing consumers with comparatively greater financial relief.
He added that certain small vehicles may also benefit from reductions in federal excise duty and capital value tax. These concessions could result in an estimated price difference of Rs250,000 to Rs300,000 for vehicles priced between Rs5 million and Rs6 million.
However, the government is also considering imposing a new levy on conventional petrol-powered vehicles to compensate for potential revenue losses resulting from tax concessions.
Public transport concerns overlooked
Questioning the priorities of the new policy, Khan highlighted the limited ownership of private vehicles in Pakistan.
He said only 6.6 per cent of households in the country own a car, while approximately 57 per cent rely on motorcycles. Around 41 per cent of households reportedly own neither a car nor a motorcycle.
He further pointed out that approximately 51 per cent of Pakistan’s population relies on public transport, arguing that the government should prioritise improving public transportation facilities before focusing extensively on promoting electric vehicles.
Used car imports pose challenges for local industry
Khan also expressed concerns over proposals to facilitate the import of used vehicles, warning that such measures could negatively affect Pakistan’s local automobile manufacturing and auto parts industry.
He explained that increased imports of completely built vehicles and automobile components could reduce demand for locally manufactured parts, putting domestic manufacturers under financial pressure.
According to him, if local assemblers increasingly prefer imported components over locally produced alternatives, domestic auto parts manufacturers could face serious challenges, potentially threatening the sustainability of their businesses.
Local production of electric vehicles essential
Discussing the promotion of electric motorcycles and rickshaws as alternatives to petrol-powered vehicles, Khan said providing subsidies for imported electric vehicles would not constitute a sustainable industrial policy.
He stressed that Pakistan must focus on local manufacturing, technology transfer and employment generation rather than relying on completely built imported vehicles or assembling imported components.
He also highlighted the importance of consistency in government policies, recalling how consumers previously invested in CNG conversion kits following government incentives, only to face difficulties when CNG availability subsequently declined.
Khan warned that a similar situation could emerge if the government later discourages electric vehicles due to electricity shortages, potentially affecting consumers who invest in the technology.
